Best Cash Back Credit Cards

Cash back credit cards can be a great way to earn rewards for the things you buy every day. The typical cash back rate is 1%, although some cash back credit cards offer a higher percentage for certain purchases like groceries and gas. Keep in mind that these cards generally require a good to excellent credit rating for approval and often come with a higher interest rate. If you carry a balance month-to-month, you'll probably end up paying many times over in interest what you get in cash back.

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Best Cash Back Credit Cards (6)

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How do cash-back credit cards work?

Every time you use your card, you will get a percentage of that transaction back in a rewards account as cash. Typical rewards range from 1%-6% cash-back.

Amounts vary depending on what type of cash-back card you have and which bank issues it.

Similar to other points cards, cash-back cards may have specific bonus categories (supermarkets are common) or a specific brand tied to their name, such as the Chase Amazon.com Rewards Visa Card.

To redeem the cash-back, you just need to go into your account and apply it to your statements. The caveat for most cards is that you have to redeem a minimum amount of cash-back at a time, like $25 for example.

Is a cash back credit card right for you?

When used responsibly, cash back cards are a great way to earn rewards and enjoy extra perks when shopping and traveling. Some cash back cards are for any kind of spending, while others provide their best rates for certain types of purchases (these are called bonus reward categories).

Cash back cards are relatively flexible and easy to use. Other rewards cards that offer points sometimes have more complicated redemption systems. The same is true for travel credit cards, some of which offer miles or points that can only be redeemed through a co-branded airline or hotel.

Unlike cards that earn points, the rewards you earn with cash back cards can easily be credited back to your card account, through a statement credit. In some cases you can also have it directly deposited into a bank account, or redeem it for certain gift cards or merchandise.

So these cards are appealing if you don’t want to spend time trying to redeem points or miles for their best possible value. You’ll know exactly how much you’ll be getting back right when you make a purchase.

Whether you spend a lot or a little, a cash back card could be a good way to constantly get a bit of a discount. And by using it responsibly you’ll be improving your credit too, which won’t happen if you use cash or a debit card.

Rewards cards usually require pretty good credit, but there are also options for fair or average credit, and even poor or limited credit. Most people should be able to find a card that suits them in some way, even if it’s not a perfect fit for all their spending.

Consider a cash back rewards card if you:

Are using cash or a debit card for most of your spending

Want to save a bit of money

Often make purchases of a certain type, like gas, groceries, or dining

Make many different types of purchases

Want to redeem your rewards for statement credits to reduce your balance, rather than deal with point redemption systems or transfers

Will use the card responsibly, so it’s profitable rather than a cost to you

Selection criteria: what makes a great cash bach credit card?

In general, you want to pick the cash back card that’s going to earn you the most cash back possible, but there’s more to it than that. Choosing the right card will depend on your spending habits and how much maintenance you want to put into a credit card. Here are the criteria that you should consider:

Required credit rating

The most generous cash back cards will usually have a high barrier to entry. While you want to get the best card possible for your credit rating, you also want to minimize inquiries into your credit history, which can lower your credit score. You should check the required credit rating for a card and make sure you can qualify before you apply.

Type of cash back card

Recall that there are three primary types of cash back cards: flat-rate, tiered, and rotating category. The type you choose will depend on whether you prefer simplicity or the ability to maximize your cash back through bonus categories.

Bonus categories

You should take a look at a cash back card’s bonus categories to make sure they match your spending habits. For instance, if you have a family that eats at home most of the time, you may be best off with a card that offers a bonus on grocery purchases, whereas if you dine out often you may prefer a card with a bonus on restaurant purchases. Or, you may get a higher cash back rate with a card that offers the same flat rate on all your purchases.

Some of the most popular categories include groceries, restaurants, gas, rideshare services, Amazon.com, wholesale clubs, department stores, and home improvement stores. There are also business cash back cards, which reward you for spending on advertising, utilities, software and hardware, travel, and more.

Sign-up bonus

Many cash back cards offer a $100 to $200 sign-up bonus to new cardholders that manage to meet a spending threshold within a certain time limit. You should factor this into your overall card rewards – depending on whether you plan to hold the card for the short term or the long term – it could put you ahead of a card with a higher cash back rate, but no sign-up bonus.

Annual fee

Cash back cards usually don’t include an annual fee, but a few do – such as the Blue Cash Preferred card from American Express. Don’t be deterred by a card with an annual fee. Depending on your spending habits, you can often earn more cash back, even once you subtract the fee. Also, there are cards with annual fees that waive the fee the first year, making your first-year savings that much more generous. Think in the long term about how you plan to use your card. If it's a card you plan to use for the long haul and for moderate expenditures, a no annual fee card may be best.

Redemption flexibility

How hard do you want to work to get your cash back? You should consider the flexibility of the card’s redemption options, including how often you can redeem your cash back (some cards only allow you to redeem once a year), how many options you have for redeeming your cash back, how much cash back you need to collect before you can redeem it and whether you can set your account to redeem automatically to save yourself some work.

0% introductory offers

If you plan to look for a 0% intro APR offer with cash back options, make sure that you pay in full any new purchases if there is no 0% purchase offer. Also, factor in the balance transfer fee, which can be up to 5%. That said, The Amex Everyday® Credit Card from American Express† is an example of a cash back that offers no balance transfer fee if you meet its terms.

Interest rate

Interest rates and penalties are probably not the top priority for consumers who are considering a cash back card. Of course, you should avoid carrying a balance on the card, but you should also apprise yourself of a card’s interest rate before you apply and keep an eye out for rates that a far above average.

Foreign transaction fees

If you are planning to use your cash back card outside of the U.S., you should look for a card with no foreign transaction fee, to spare yourself a 2 to 3 percent fee on all your charges.

Benefits

In addition to cash back on all your purchases, cash back cards often include benefits that can add to a card’s value depending on how you use them. Common benefits on cash back cards include travel and purchase protections, such as car rental insurance and extended warranties.

How to make the most of your cash back credit card?

Using different cards for different purposes can help you get the most out of your credit cards. Below are some things to consider when you make your game plan to reach the highest reward rates on your credit cards. Remember, you don’t have to choose just one card or stick with a card forever. It is healthy for your credit score to have at least 11 open rotating lines of credit. Also, the more cards you have, the higher your credit limit, which will help with for your credit utilization and debt-to-credit ratio, ultimately improving your credit score. However, I don’t advise applying for more than one card at a time, and you should be sure to meet any minimum spending requirements needed to earn the sign-up bonus before obtaining your next card.

Strategy #1: Have at Least One Good Everyday Card

A good everyday card is one that earns more than 1 percent return on all purchases. When making smaller purchases that don’t fall into a specific bonus category with a higher return, you’ll want to use your everyday card. Savvy rewards earners use their credit cards for everything, no matter how big or small.

Many cashback cards offer just 1 percent on all purchases, but you don’t have to settle for that. When looking for a cashback card to use for everyday spending, you will want one that awards the most on all purchases. The Capital One® Quicksilver® Card from Capital One is a good example of an everyday card. Instead of offering the usual 1 percent back on purchases, this card offers an unlimited 1.5 percent back. In addition, Quicksilver cardholders also receive a one-time bonus of $100 if they spend $500 within the first three months.

Strategy #2: Consider Several Specialty Cards

These are cards that focus on specific types of purchases and consistently give you a high reward rate for certain bonus categories. A good specialty card typically offers at least 2 percent cash back in two or more shopping categories. These cards usually offer larger cash back bonuses on select qualifying purchases, even when compared to good everyday cards.

An example of a good cashback specialty card is the Premier Dining Rewards From Capital One. This card allows you to earn unlimited 3 percent cash back on dining, as well as 2 percent cash back on groceries and 1 percent on all other purchases.

When comparing cards, be sure to consider your spending habits. Depending on the card, you can earn bonus rewards for a variety of different purchases, including things like gas, travel, groceries, entertainment and much more. If you want to maximize your cashback rewards, it’s a good idea to have a couple of these specialty cards in addition to your everyday card.

Strategy #3: Take Advantage of Rotating Bonus Categories

Some cashback credit cards have bonuses for rotating categories of purchases. These types of cards have large cashback bonuses for certain types of purchases, which change periodically throughout the year. It may be in your best interest to have several of these cards so you can switch between them as the bonus categories change.

For example, the Discover it® Cash Back card offers 5 percent cash back in rotating categories every quarter. Some of these include purchases made from Amazon, gas stations, restaurants and wholesale clubs. Credit cards that award spending bonuses in rotating categories are great due to the large quarterly rewards you can earn.

Strategy #4: Earn Sign-Up Bonuses and One-Time Offers

Many of the best cashback cards offer a sign-up bonus. These sign-up bonuses give you a significant cashback bonus when you spend a certain amount on that card within an allotted period of time. Additionally, one-time offers are bonuses that you will only receive once, they will not be ongoing or on an annual basis, but they can definitely put some quick cash, back in your pocket.

Good examples of a cashback cards that come with both a sign-up bonus and a one-time offer include the Blue Cash Everyday® Card from American Express and the Blue Cash Preferred® Card from American Express. You can get up to $350 cash back with these cards. By spending $1,000 within your first three months of having one of them, you can earn up to $150 cash back as a welcome bonus, depending on which card you have. Both of these cards include a one-time offer which allows you to get 10 percent cash back at restaurants within the first six months of having the card, for a total return of up to $200.

Strategy #5: Pay Monthly Bills and Living Expenses

One of the best ways to consistently earn rewards with your cashback credit cards is by using them to pay all your monthly bills and living expenses. Almost any bill can be paid online with a credit card, meaning that you can use a credit card to pay for a lot more than just your phone bill. A few examples of monthly bills that should be paid for with your cashback card include cable, internet, phone, insurance and utilities like gas, water and electricity. Also, any other recurring monthly expenses, such as subscription services like Netflix and Amazon Prime, should be attached to your credit card.

You can also use your credit card to pay things you may not have considered before, like your car payments and insurance. There are even third party services available that allow people to pay their rent or mortgage with their credit card. You can also pay your taxes with your card, including property and income taxes. Some payment services charge a flat fee, while others take a percentage of the total payment. If there is a third-party service you are using to make a payment, consider any fees related with the service and make sure the rewards outweigh the cost.

In addition to monthly bills that you can pay with your credit card, there are also a great deal of regular living expenses that you cover with your cashback card, like food, clothing, health care and hygiene products. There is almost no limit to the type of monthly bills or living expenses that you can charge to your card and the rewards you can earn.

Strategy #6: Make Large Purchases

A fast way to boost your cashback rewards is to use your card for all your large purchases. Even at the lowest cashback rates, large purchases will allow you to earn a great deal of rewards in one transaction. I also want to caution anyone against using special financing or store credit cards that advertise special financing for large purchases. Many times, when you see a card or a promotion that is labeled as interest free or special financing, it is usually referring to deferred interest. This means that if you do not pay your balance in full by the end of the interest-free period, you can get slapped with interest dating back to the original date of purchase. This can cause you to get hit with a lump sum interest payment. It is much better to use your cashback credit card and get a lump sum of rewards instead.

Strategy #7: Keep Track of Bonuses and Spending

Your cards will be most lucrative if you can keep track of spending bonuses and rewards. Whether you use a high-tech approach like an app or a website, or an old-school method like labeling your cards or creating a cheat sheet, you should be familiar with the best card to use for each purchase you make.

There are many options to help you create and learn a strategy for your credit card spending. You can create a spreadsheet or just write a list. There are plenty of internet tools and apps to help as well. You will find that doing this will ultimately be a great reference and help you differentiate and use credit cards to the best of their ability. Eventually you won’t have to even think twice about it.

Strategy #8: Know Your Limits

Some cards put limits on category spending. For example, the Costco Anywhere Visa® Card by Citi allows you to earn 4 percent cash back on gas, but only up to $7,000 a year. When you max out your rewards on one card, turn to another one. Don’t spend on a card if you are not earning the bonus anymore.

Strategy #9: Try Double Dipping

Double dipping is when you use a loyalty program in conjunction with a rewards credit card. Many stores, airlines and hotels offer loyalty programs that allow you to earn rewards just for being a member. Why not earn double rewards by joining the loyalty program and paying with a rewards card?

For the most part I avoid specific store credit cards. They have notoriously high interest rates and, in many cases, you can get the rewards without the credit card. By joining their loyalty program and paying with a cashback credit card you can get rewarded on both sides.

Strategy #10: Consider Business Cards

Cashback business credit cards can be another avenue to increase your rewards rate for bonus spending categories. You don’t need a storefront or a corporation to get one. If you have a side business, like buying and selling stuff on ebay or renting a room on Airbnb, you can get a small business card. No matter how small your side hustle is, you can qualify, which can help you increase your rewards rates in the realm of things like office supplies and internet services.

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